Ergodic transition in a simple model of the continuous double auction

Radivojević, Tijana, Anselmi, Jonatha and Scalas, Enrico (2014) Ergodic transition in a simple model of the continuous double auction. PLoS ONE, 9 (2). e88095. ISSN 1932-6203

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We study a phenomenological model for the continuous double auction, whose aggregate order process is equivalent to two independent M/M/1 queues. The continuous double auction defines a continuous-time random walk for trade prices. The conditions for ergodicity of the auction are derived and, as a consequence, three possible regimes in the behavior of prices and logarithmic returns are observed. In the ergodic regime, prices are unstable and one can observe a heteroskedastic behavior in the logarithmic returns. On the contrary, non-ergodicity triggers stability of prices, even if two different regimes can be seen.

Item Type: Article
Schools and Departments: School of Mathematical and Physical Sciences > Mathematics
Subjects: Q Science > QA Mathematics > QA0273 Probabilities. Mathematical statistics
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Depositing User: Enrico Scalas
Date Deposited: 19 Mar 2014 14:09
Last Modified: 02 Jul 2019 21:32

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